Does Hydrodog require approval for pledging the Hydrodog agreement or ownership interest as security?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
nowledge that we can sell our assets; sell securities in a public offering or in a private placement; merge with, acquire, or be acquired by another company; or undertake a refinancing, recapitalization, leveraged buy-out, or other economic or financial restructuring, without restriction and without affecting your obligations under this Agreement.
- 15.2 By You. You understand and acknowledge that the rights and duties created by this Agreement are personal to you (or, if you are a Business Entity, to your owners) and that we have granted the Franchise to you in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability and financial capacity. Accordingly, neither this Agreement (or any interest in it) nor any ownership or other interest that would reduce your voting or equity interest to less than 51% in you or your HydroDog Business may be transferred without our prior written approval. Any transfer without such approval constitutes a breach of this Agreement and is void and of no effect. As used in this Agreement, the term "transfer" includes your (or your owners') voluntary,
involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in: (a) this Agreement; (b) you; or (c) your HydroDog Business.
An assignment, sale, gift or other disposition includes the following events:
- (a) transfer of ownership of capital stock or a partnership interest;
- (b) merger or consolidation or issuance of additional securities or interests representing an ownership interest in you;
- (c) any issuance or sale of your stock or any security convertible to your stock;
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, the franchisee needs prior written approval from Hydrodog to pledge the franchise agreement or ownership interest as security. Specifically, Item 15.2 states that neither the agreement nor any ownership interest that would reduce the franchisee's voting or equity interest to less than 51% can be transferred without Hydrodog's prior written approval. Any transfer without this approval constitutes a breach of the agreement and is considered void.
Item 15.2 defines "transfer" broadly to include any voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in the agreement, the franchisee, or the Hydrodog business. This definition extends to events such as the transfer of ownership of capital stock or a partnership interest, mergers, consolidations, the issuance of additional securities, or the sale of stock or securities convertible to stock.
Item 23 further clarifies that a pledge of the agreement to someone other than Hydrodog or of an ownership interest as security requires Hydrodog's consent. This requirement ensures that Hydrodog maintains control over who is involved in the franchise and that any changes in ownership or control are subject to their approval. This is a common practice in franchising, as franchisors want to ensure that any new parties involved meet their standards and are capable of operating the franchise successfully.
Therefore, a prospective Hydrodog franchisee should be aware that they cannot use the franchise agreement or their ownership interest as collateral without first obtaining written consent from Hydrodog. Failure to do so could result in a breach of the franchise agreement and potential termination of the franchise.